UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





x
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended September 30,
      2008OR ̈
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from ________________ to
      ________________





Commission
file number:  000-1434389





UNIVERSAL SOLAR TECHNOLOGY,
INC.


(Exact
name of registrant as specified in its charter)





Nevada
              
              26-0768064(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)No.
      1 Pingbei Road 2,
                Nanping
      Science & Technology Industrial Park,
                Zhuhai
      City, Guangdong Province,
                The
      People’s Republic of China
              
              519060(Address
      of principal executive offices)
              
              (Zip
      Code)





86-756-8682610


(Registrant’s
telephone number, including area code)







(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes  x
                  No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.


Large
      accelerated filer  ̈
                Accelerated
      filer   ̈
                Non-accelerated
      filer   ̈


Smaller
Reporting Company x


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes   ̈
                No  x





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





Class
              
              Outstanding
      at November 20, 2008Common
      Stock, $0.0001 par value per share
              
              20,962,408
      shares





TABLE
OF CONTENTS





PART I - FINANCIAL
      INFORMATION
                3Item
      1. Financial Statements
                3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                9Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                12Item
      4T. Controls and Procedures
                12PART
      II - OTHER INFORMATION
                13Item
      1. Legal Proceedings
                13Item
      1A. Risk Factors
                13Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                28Item
      3. Defaults Upon Senior Securities
                28Item
      4. Submission of Matters to a Vote of Security Holders
                28Item
      5. Other Information
                28Item
      6. Exhibits
                28SIGNATURES
                29




Except
as otherwise required by the context, all references in this report to "we",
"us”, "our", “Universal Solar Technology” or "Company" refer to the consolidated
operations of Universal Solar Technology, Inc., and its wholly owned
subsidiaries.




2


Item
1. Financial Statements.




UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARY


(A
Development Stage Company)





CONSOLIDATED
BALANCE SHEET










September 30, 2008
                
                
                December 31, 2007Unaudited
                
                
                AuditedASSETSCURRENT
      ASSETS:Cash
                
                $
                155,817
                
                
                $
                91,183Other
      sundry current assets
                
                
                6,777
                
                
                
                1,779TOTAL
      CURRENT ASSETS AND TOTAL ASSETS
                
                $
                162,594
                
                
                $
                92,962LIABILITIES’
      AND STOCKHOLDERS’ DEFICIENCYCURRENT
      LIABILITIES:Accrued
      expenses
                
                $
                5,906
                
                
                $
                17,500Stockholder
      loan
                
                
                523,548
                
                
                
                106,730TOTAL
      CURRENT LIABILITIES
                
                
                529,454
                
                
                
                124,230STOCKHOLDERS’
      DEFICIENCY:Preferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued
      and outstandingCommon
      stock, $0.0001 par value, 90,000,000 shares authorized, September 30, 2008
      - 20,962,408 shares issued and outstandingDecember
      31, 2007 - 20,000,000 shares issued and outstanding
                
                
                2,096
                
                
                
                2,000Additional
      paid-in capital
                
                
                154,329
                
                
                
                128,757Deficit
      accumulated during development stage
                
                
                (532,095
                )
                
                
                (156,911
                )Accumulated
      other comprehensive income (loss)
                
                
                8,810
                
                
                
                (5,114
                )TOTAL
      STOCKHOLDERS’ DEFICIENCY
                
                
                (366,860
                )
                
                
                (31,268
                )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
                
                $
                162,594
                
                
                $
                92,962









See notes
to financial statements


3





UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARY


(A
Development Stage Company)





CONSOLIDATED
STATEMENTS OF OPERATIONS





Three Months
                Ended
                September 30, 2008
              
              
              Nine Months
                Ended
                September 30, 2008
              
              
              From Inception
                (July 2, 2007)
                To
                September 30, 2008SALES
              
              $
              -
              
              
              $
              -
              
              
              $
              -COSTS
      AND EXPENSES:General
      and administrative expenses
              
              
              157,863
              
              
              
              361,940
              
              
              
              518,851OPERATING
      LOSS
              
              
              (157,863
              )
              
              
              (361,940
              )
              
              
              (518,851
              )INTEREST
      EXPENSE
              
              
              7,244
              
              
              
              13,244
              
              
              
              13,244NET
      LOSS
              
              $
              (165,107
              )
              
              $
              (375,184
              )
              
              $
              (532,095
              )BASIC
      AND DILUTED LOSS PER COMMON SHARE
              
              $
              (0.01
              )
              
              $
              (0.02
              )
              
              $
              (0.03
              )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
              
              
              20,962,408
              
              
              
              20,659,672
              
              
              
              20,348,622









See notes
to financial statements


4


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARY


(A
Development Stage Company)





CONSOLIDATED
STATEMENTS OF CASH FLOWS





Nine Months
                  Ended
                  September 30, 2008
                
                
                From Inception
                  (July 24, 2007) to
                  September 30, 2008OPERATING
      ACTIVITIES:Net
      loss
                
                $
                (375,184
                )
                
                $
                (532,095
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Imputed
      interest on stockholder loan
                
                
                13,244
                
                
                
                13,244Stock
      issued for services
                
                
                9,424
                
                
                
                9,424Changes
      in operating assets and liabilities:Other
      current assets
                
                
                (4,998
                )
                
                
                (870
                )Accrued
      expenses
                
                
                (11,594
                )
                
                
                -NET
      CASH USED IN OPERATING ACTIVITIES
                
                
                (369,108
                )
                
                
                (510,297
                )FINANCING
      ACTIVITIES:Loan
      from stockholders
                
                
                416,818
                
                
                
                523,548Sale
      of common stock
                
                
                3,000
                
                
                
                131,755NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                419,818
                
                
                
                655,303EFFECT
      OF EXCHANGE RATE ON CASH
                
                
                13,923
                
                
                
                (8,095
                )INCREASE  IN
      CASH
                
                
                64,633
                
                
                
                136,911CASH
      – BEGINNING OF PERIOD
                
                
                91,184
                
                
                
                -CASH
      – END OF PERIOD
                
                $
                155,817
                
                
                $
                136,911







See notes
to financial statements


5


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARY


(A
Development Stage Company)





NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





SEPTEMBER
30, 2008





1
            BUSINESS
      DESCRIPTION





Universal
Solar Technology, Inc. (the “Company”) was incorporated in the State of Nevada
on July 24, 2007.  The Company operates through its wholly-owned
subsidiary, Kuong U Science & Technology (Group) Ltd. (“Kuong U”), a company
incorporated in Macau, Peoples Republic of China (“PRC”) on May 10, 2007, and
plans to manufacture in the PRC through Nan Yang Kuong U Solar Energy Ltd., a
wholly foreign owned enterprise incorporated in the PRC.   The
Company intends to provide silicon wafers, solar cell, high efficiency solar
photovoltaic (“PV”) modules and other PV application products such as solar
lighting systems in the European Union, North America, Africa and
Asia.





Our
independent auditors have added an explanatory paragraph to their audit report
issued in connection with the financial statements for the period ended December
31, 2007, relative to our ability to continue as a going concern.  We had
negative working capital of $31,268 as of December 31, 2007, we had a deficit
accumulated during development stage of $156,911 incurred through  December
31, 2007.  As of September 30, 2008 we have negative working
capital of $366,860 and a deficit accumulated during development stage of
$532,095.  This means that there is substantial doubt that we can continue
as an ongoing business for the next 12 months. The financial statements do not
include any adjustments that might result from the uncertainty about our ability
to continue our business.





2
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation - Development Stage Company





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted for interim financial information
and with the instructions to Form 10-Q and Article 8 of Regulation S-X relating
to smaller reporting companies.  Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles (“GAAP”) for complete financial statements.  In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included.  Operating results for the three and nine-month periods
ended September 30, 2008 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2008.





The
balance sheet at December 31, 2007 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by GAAP for complete financial statements.





Use
of estimates in the preparation of financial statements





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses during each reporting
period.  Actual results could differ from those
estimates.


6









Cash





The
Company maintains cash and cash equivalents with financial institutions in the
PRC which are not insured or otherwise protected.




Research
and development costs




Research
and development costs are charged to expenses as incurred.




Currency
translation




Since the
Company operates solely in the PRC, the Company=s
functional currency is the Chinese Yuan (ARMB@).    Assets
and liabilities are translated into U.S. Dollars at the year end exchange rates
and records the related translation adjustments as a component of other
comprehensive income (loss).  Revenue and expenses are translated
using average exchange rates prevailing during the period.  Foreign
currency transaction gains and losses are included in current
operations.





3
            STOCKHOLDER
      LOAN





The
amounts due to stockholders are non-interest bearing and due on demand. The
Company has imputed interest of approximately $13,244 for the nine months ended
September 30, 2008, which has been recorded as a contribution to
capital.





4
            RELATED
      PARTY TRANSACTIONS





The
Company’s principal executive office is that of the Company’s
chairman.  The Company does not pay any rent to the chairman and there
is no agreement to pay any rent in the future.





5
            RISK
      FACTORS





Vulnerability
due to Operations in PRC





The
Company=s
operations may be adversely affected by significant political, economic and
social uncertainties in the PRC.  Although the PRC government has been
pursuing economic reform policies for more than 20 years, there is no guarantee
that the PRC government’s pursuit of economic reforms will be consistent or
effective.





The PRC
has adopted currency and capital transfer regulations.  These
regulations require that the Company complies with complex regulations for the
movement of capital.  Because most of the Company’s future revenues
will be in RMB, any inability to obtain the requisite approvals, or any future
restrictions on currency exchanges, will limit the Company’s ability to fund its
business activities outside China or to pay dividends to its
shareholders.





The
Company’s assets will be predominantly located inside China.  Under
the laws governing foreign invested enterprises in China, dividend distribution
and liquidation are allowed, but subject to special procedures under the
relevant laws and rules.  Any dividend payment will be subject to the
decision of the board of directors and subject to foreign exchange rules
governing such repatriation.  Any liquidation is subject to both the
relevant government agency’s approval and supervision, as well as the foreign
exchange control.


7









Vulnerability
due to Operations in PRC - Continued





In
addition, the results of business and prospects are subject, to a significant
extent, to the economic, political and legal developments in China.





While
China’s economy has experienced a significant growth in the past twenty years,
growth has been irregular, both geographically and among various sectors of the
economy.  The Chinese government has implemented various measures to
encourage economic growth and guide the allocation of resources.  Some
of these measures benefit the overall economy of China, but may also have a
negative effect on the Company.  The Company’s sales and financial
condition may be adversely affected by the government control over capital
investments or changes in tax regulations.





Foreign
companies conducting operations in the PRC face significant political, economic
and legal risks.  The Communist regime in the PRC includes a stifling
bureaucracy which may hinder Western investment. Any new government regulations
or utility policies pertaining to the Company’s PV products may result in
significant additional expenses to the Company, Company’s distributors and end
users and, as a result, could cause a significant reduction in demand for the
Company’s PV products.


8




Item
2.  Management’s Discussion and Analysis of Financial Condition and
Resultsof Operations.




The
following discussion should be read in conjunction with the Financial Statements
and Notes thereto appearing elsewhere in this Form 10-Q.




Safe Harbor Regarding
Forward-Looking Statements




The
following discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
report. Although management believes that the assumptions made and expectations
reflected in the forward-looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to be correct or
that actual results will not be different from expectations expressed in this
report.





Overview





History





Universal
Solar Technology, Inc. was incorporated in the State of Nevada on July 24, 2007.
It operates through its wholly owned subsidiary, Kuong U Science &
Technology (Group) Ltd. (“Kuong U”), a company incorporated in Macau, Special
Administrative Region of the People's Republic of China (Macau SARC) on May 10,
2007, and a newly registered WFOE in Henan Province, Nan Yang Kuong U Solar
Energy Ltd., on September 3, 2008.





We are a
development stage company and have not generated or realized any revenues from
our business operations.





We have
completed the development of our prototype product, and selected Yuemao Laser as
the third party manufacturer should we receive orders. We believe the technical
aspects of our prototype products are sufficiently developed and are ready to
market in the EU and elsewhere.





From now
to 60 days from the completion of our offering, we expect to receive test
results for our Photovoltaic Modules, GYSP175. We expect to know the results
whether or not our products have passed the VDE standard certificates of IEC
61730-1, and 61730-2, and IEC 61215. If we receive the certificates of IEC
61730-1, and 61730-2, and IEC 61215, we would be able to market our Photovoltaic
Modules, GYSP175 in Europe. If we fail to receive the certificates, we will
continue to improve our prototype products design and re-apply for EU standard
certification.





We have
registered a Wholly Foreign Owned Enterprises (WFOE) in Nanyang City, Henan
Province, China. We plan to manufacturing solar wafers, solar cell and
Photovoltaic Modules. We received Certificate of Approval from Henan Provincial
government for our WFOE on September 3, 2008 and our WFOE business license on
September 8, 2008. In addition, we received foreign exchange certificate for our
WFOE on September 3, 2008 from local branch of State Administration of Foreign
Exchange (SAFE). We have leased 17.63 acres of land (equivalent to 71,337 square
meters) for 50 years lease at costs of $3,714 per acre.





We must
raise cash from sources other than operations. Our only other source for cash at
this time is investments by others in our company. We must raise cash to
implement our project and begin our operations in China. Even if we raise the
maximum amount of money in our public offering, we do not know how long the
money will last, however, we do believe it will last twelve months. We will not
begin China operations until we raise money from our public
offering.





To meet
our need for cash we are attempting to raise money from our public offering. We
believe that we will be able to raise enough money through our public offering
to begin China operations but we cannot guarantee that once we begin China
operations we will stay in business after China operations have commenced. If we
are unable to successfully sell our PV modules products internationally, we may
quickly use up the proceeds from the minimum amount of money from our public
offering and will need to find alternative sources, like a second public
offering, a private placement of securities, or loans from our officers or
others in order for us to maintain our operations. At the present time, we have
not made any arrangements to raise additional cash, other than through our
public offering. If we need additional cash and cannot raise it we will either
have to suspend operations until we do raise the cash, or cease operations
entirely. If we raise the minimum amount of money from our public offering, we
project the funds will last a year but give us with limited funds available to
develop our growth strategy. If we raise the maximum amount, we believe the
money will last a year and also provide funds for growth strategy. If we raise
less than the maximum amount and we need more money we will have to revert to
obtaining additional money as described in this paragraph. Other than as
described in this paragraph, we have no other financing plans.


9


Plan of
Operation





Assuming
we raise the minimum amount in our public offering, we believe we can satisfy
our cash requirements during the next 9 months. We will not produce any product
before we receive down payment from our buyer. We do not expect to purchase or
sell plant or significant equipment. Further we do not expect significant
changes in the number of employees. Upon completion of our public offering, our
specific goal is to profitably sell our products, to build our WFOE subsidiary
in Nanyang City, Henan province in China, and to begin factory constructions
after we finish the offering.





We intend
to accomplish the foregoing through the following milestones:





1.
Complete our public offering. We believe that we will raise sufficient capital
to begin our operations in Nanyang City, Henan Province, China. We believe this
could take up to 180 days from the date the Securities and Exchange Commission
declares our offering effective. We will not begin factory construction in
Nanyang City, Henan Province, China until we have closed our public offering. We
intend to concentrate all of our efforts on raising as much capital as we can
during this period.





2. If we
receive the certificates of IEC 61730-1, and 61730-2, and IEC 61215, we would be
able to market our Photovoltaic Modules, GYSP175 to Europe. Before we received
such certificates, we plan to market our PV modules and solar lighting systems
to Asia and Africa countries. We expect to receive orders from Asia or Africa in
the fourth quarter of 2008.





3. After
completing the offering, we will immediately begin to establish our office and
in Nanyang City, Henan Province, China. We have leased the land for our new
manufacturing facilities. We need to begin Nanyang City, China operations.
Establishing our offices will take 7-10 days. We believe that it will cost
$5,000 to establish our office. We do not intend to hire more employees
immediately. Our sole officer and director will handle our administrative
duties.





4. We
have leased 17.63 acres of land (equivalent to 71,337 square meters) under a 50
year lease at costs of $3,714 per acre with local government in Nanyang City,
Henan Province, China. We plan to build a 5,000 square meters factory space. Our
estimated costs for building a new factory is estimated at $85.7 per square
meter. Our total estimated cost of the factory is $428,500. We will not begin
factory construction before we find strategic investors.





5. We
already registered a Wholly Foreign Owned Enterprise (WFOE) in Nanyang City,
Henan Province in China. We have received approvals from all government
authorities as of September 30, 2008.





Limited
Operating History; Need For Additional Capital





There is
no historical financial information about us upon which to base an evaluation of
our performance. We are a development stage company and have not generated any
revenues. We cannot guarantee that we will be successful in our business
operations. Our business is subject to risks inherent in the establishment of a
new business enterprise, including limited capital resources and possible cost
overruns due to price and cost increases in services and products.





To become
profitable, we have to sell our products and generate revenue. In addition,
because our new WFOE manufacturing setup in China will require additional
investment, we are seeking equity financing to provide the capital required to
implement our operations in China.





We have
no assurance that future financing will be available to us on acceptable terms.
If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations into China. Equity financing could
result in additional dilution to existing shareholders.




10





RESULTS
OF OPERATIONS





For
the nine months ended September 30, 2008




Our loss
for the nine months period ending September 30, 2008 was $375,184. We spent
$246,909 on professional fees, $42,837 on salary, $56,430 on business
information memorandum, $12,904 on rent and approximately $2,860 of
miscellaneous expenses. In addition, $13,244 of interest expense was imputed on
the stockholder loan. We have not started our proposed business
operations





Liquidity
and capital resources





As of
September 30, 2008, we have not yet generated any revenues from our business
operations.




As of
September 30, 2008, our total assets were $162,594 and our total liabilities
were $529,454.  As of September 30, 2008, we had cash of
$155,817.





Our
operating plan for 2008 is focused on setting up a WFOE operation in Nanyang
City, Henan Province, China, and getting approval for EU standard certification
in order for us to generate sales in the EU market. We estimate that
approximately $150,000 will be required to support this plan for the next 12
months.  We are actively seeking additional funding, but to date have
not entered into any agreements or other arrangements for such financing. There
can be no assurance that the required additional financing will be available on
terms favorable to us or at all.





Without
additional funding, the company will not be able to pursue its business model.
If adequate funds are not available or are not available on acceptable terms
when required, we would be required to significantly curtail our operations and
would not be able to fund the development of the business envisioned by our
business model. These circumstances could have a material adverse effect on our
business and our ability to continue to operate as a going concern.





OFF-BALANCE
SHEET ARRANGEMENTS




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our
investors.




CRITICAL
ACCOUNTING POLICIES




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported in the
financial statements, including the notes thereto, and related disclosures of
commitments and contingencies, if any. We consider our critical accounting
policies to be those that require the more significant judgments and estimates
in the preparation of financial statements, including the
following:





Use of estimates. In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting periods. These accounts and estimates include, but are not limited to,
the valuation of accounts receivable, inventories, deferred income taxes,
provision for warranty and the estimation on useful lives of property, plant and
equipment. Management makes these estimates using the best information available
at the time the estimates are made; however, actual results could differ
materially from those estimates.





Concentrations of credit
risk. Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash and cash
equivalents. As of September 30, 2008, substantially all of the Company’s cash
and cash equivalents were held by major financial institutions located in the
Macau Special Administrative Region of the People's Republic of China (Macau
SARC), which management believes are of high credit quality.





Revenue
recognition. Revenue is recognized when it is probable that the
economic benefits will flow to the Company and when the revenue can be measured
reliably, on the following basis:





(i)
            revenue
      from sales of the Company’s products is recognized when the significant
      risks and rewards of ownership have been transferred to the buyer at the
      time of delivery and the sales price is fixed or determinable and
      collection is reasonably assured;
and


(ii)
            interest
      income is recognized on an accrual
basis.


11





We have
not yet generated any revenue as of September 30, 2008.





Income Taxes. The
Company uses the asset and liability method of accounting for income taxes
pursuant to SFAS No. 109 “Accounting for Income Taxes”. Under the asset and
liability method of SFAS 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between
the financial statements carrying amounts of existing assets and liabilities and
loss carry forwards and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.





Comprehensive
income. The Company has adopted SFAS 130, “Reporting Comprehensive
Income”, which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Components of comprehensive
income include net income and foreign currency translation
adjustments.





Foreign currency
translation. The functional currency of the Company is RMB. The
Company maintains its financial statements in the functional currency. Monetary
assets and liabilities denominated in currencies other than the functional
currency are translated into the functional currency at rates of exchange
prevailing at the balance sheet date. Transactions denominated in currencies
other than the functional currency are translated into the functional currency
at the exchanges rates prevailing at the dates of the transaction. Exchange
gains or losses arising from foreign currency transactions are included in the
determination of net income for the respective periods.





For
financial reporting purposes, the financial statements of the Company which are
prepared using the functional currency have been translated into United States
dollars. Assets and liabilities are translated at the exchange rates at the
balance sheet dates and revenue and expenses are translated at the average
exchange rates and shareholders’ equity is translated at historical exchange
rates. Any translation adjustments resulting are not included in determining net
income but are included in foreign exchange adjustment to other comprehensive
income, a component of shareholders’ equity.





Item
3.  Quantitative and Qualitative Disclosures About Market Risk





The
Company is subject to certain market risks, including changes in interest rates
and currency exchange rates.  The Company does not undertake any specific
actions to limit those exposures.




Item 4T.Evaluation
of Disclosure Controls and Procedures





Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.




Management’s Report on
Internal Controls over Financial Reporting




Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of consolidated financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.  There has been no change in
the Company’s internal control over financial reporting during the quarter ended
September 30, 2008 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.


12


The
Company’s management, including the Company’s CEO and CFO, does not expect that
the Company’s disclosure controls and procedures or the Company’s internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.








PART
II - OTHER INFORMATION


Item
1.    Legal Proceedings.




None.





Item
1A.    Risk Factors.





An
investment in our common stock is speculative and involves an extremely high
degree of risk and uncertainty. You should carefully consider the risks
described below, together with the other information contained in this report,
including the consolidated financial statements and notes thereto of our
Company, before deciding to invest in our common stock. The risks described
below are not the only ones facing our Company. Additional risks not presently
known to us or that we presently consider immaterial may also adversely affect
our Company. If any of the following risks occur, our business, financial
condition and results of operations and the value of our common stock could be
materially and adversely affected.





RISKS
RELATING TO OUR COMPANY





WE ARE AN
EARLY STAGE COMPANY AND HAVE NO OPERATING HISTORY ON WHICH TO EVALUATE OUR
POTENTIAL FOR FUTURE SUCCESS.





Our
company was formed in July 2007, and to date has had limited time, which has
been spent on formation, planning, analysis and testing. In addition, we have no
operating history under our proposed business model upon which you can evaluate
our business and prospects. To date, we have sent one of our prototype products
for testing at a testing facility and are awaiting results from those tests.
Initially, we intend to seek EU standard certification of this product and are
awaiting the results of that process.





Our lack
of operating history may prevent a meaningful evaluation of our business,
financial performance and prospects. Subject to successful product testing and
receiving a purchase order for such product in the second quarter of 2008, we
plan to have our first solar cell manufactured using a third-party manufacturer
to produce the product. We have not shipped any number of solar cells and have
not recognized any revenues from sales of our solar cells.





There
can be no assurance that we will derive significant revenues from products
sales.





We are an
early stage company. You must consider the risks and uncertainties frequently
encountered by early stage companies in new and rapidly evolving markets such as
competing technologies, lack of customer acceptance of a new or improved service
or product and obsolescence of the technology before it can be fully
commercialized. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations and financial condition will
be materially and adversely affected.





Doubts
exist about our ability to continue as a going concern.





IF WE DO
NOT OBTAIN ADDITIONAL CAPITAL, WE MAY BE UNABLE TO SUSTAIN OUR
BUSINESS.





Our
operating plan for 2008 is focused on setting up a WFOE operation in Nanyang
City, Henan Province, China, and getting approval for EU standard certification
in order for us to generate sales in the EU market. We estimate that
approximately $150,000 will be required to support this plan for the next 12
months.  Since our inception in 2007, we have not received any funds
from the issuance of common stock.  We are actively seeking additional
funding, but to date have not entered into any agreements or other arrangements
for such financing. There can be no assurance that the required additional
financing will be available on terms favorable to us or at all.


13


Without
additional funding, the company will not be able to pursue its business model.
If adequate funds are not available or are not available on acceptable terms
when required, we would be required to significantly curtail our operations and
would not be able to fund the development of the business envisioned by our
business model. These circumstances could have a material adverse effect on our
business and our ability to continue to operate as a going
concern.  If additional funds are raised through the issuance of
equity or convertible debt securities, our then existing shareholders may
experience substantial dilution, and such securities may have rights,
preferences and privileges senior to those of our common stock.





IF WE
NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO
OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR
OPERATIONS.





As we
implement our growth strategies, we may experience increased capital needs and
we may not have enough capital to fund future operations without additional
capital investments. Our capital needs will depend on numerous factors,
including (1) our profitability; (2) the release of competitive products by our
competition; (3) the level of our investment in research and development; and
(4) the amount of our capital expenditures. We cannot assure you that we will be
able to obtain capital in the future to meet our needs.





If we
cannot obtain additional funding, we may be required to:





•
                reduce
      our investments in research and development;•
                limit
      our marketing efforts; and•
                decrease
      or eliminate capital
expenditures.





Such
reductions could have a material adverse affect our business and our ability to
compete.





Even if
we do find a source of additional capital, we may not be able to negotiate
acceptable terms and conditions for receiving the additional capital. Any future
capital investments could dilute or otherwise materially and adversely affect
the holdings or rights of our existing shareholders. In addition, new equity or
convertible debt securities issued by us to obtain financing could have rights,
preferences and privileges senior to our common stock. We cannot give you any
assurance that any additional financing will be available to us, or if
available, will be on terms favorable to us.





WE MAY
HAVE DIFFICULTY RAISING NECESSARY CAPITAL TO FUND OPERATIONS AS A RESULT OF
MARKET PRICE VOLATILITY OF OUR SHARES OF COMMON STOCK.





If our
business development plans are successful, we may require additional financing
to continue to develop and exploit existing and new technologies and to expand
into new markets. The exploitation of our technologies may, therefore, be
dependent upon our ability to obtain equity financing through debt and equity or
other means. In recent years, the securities markets in the United States have
experienced a high level of price and volume volatility, and the market price of
securities of many companies have experienced wide fluctuations that have not
necessarily been related to the operations, performance, underlying asset values
or prospects of such companies.





For these
reasons, our shares of common stock can also be expected to be subject to
volatility resulting from purely market forces over which we will have no
control. Such volatility may make it more difficult to find investors willing to
invest in our common stock, or to negotiate equity financing or terms that are
acceptable to us.





WE HAVE
INCURRED LOSSES IN CERTAIN PRIOR PERIODS AND MAY INCUR LOSSES IN THE
FUTURE.





We
incurred net losses of $156,911 for the period from inception (July 24, 2007) to
December 31, 2007, and we may incur losses in the future. We expect our costs
and expenses to increase as we expand our operations. Our ability to achieve and
maintain profitability depends on the growth rate of the solar power market, the
continued global market acceptance of solar power products in general and our
future products in particular, the pricing trend of solar power products, the
competitiveness of our proposed products as well as our ability to provide new
products to meet the demands of our customers and our ability to control our
costs and expenses. We may not be able to achieve or sustain profitability on a
quarterly or annual basis.




14





THERE ARE
SIGNIFICANT RISKS IN EXECUTING OUR BUSINESS STRATEGY AND OUR BUSINESS PLANS
COULD CHANGE




To
execute our business plan, we will need to recruit over 300 employees, secure
raw materials from suppliers, set up a manufacturing facility, establish a
distribution channel and secure purchase orders from customers. Each of these
elements carries substantial risk in our ability to execute on them, including
our ability to finance the costs -- estimated at $20 million for the cost to
equip a facility to manufacture three product lines -- and our ability to
successfully manage the startup. These uncertainties could cause us to
significantly change our strategy.





WE WILL
HAVE BROAD DISCRETION OVER THE USE OF PROCEEDS FROM OUR PUBLIC OFFERING AND MAY
USE THE PROCEEDS IN A MANNER SIGNIFICANTLY DIFFERENT FROM OUR CURRENT
PLANS.





While we
currently expect to use the net proceeds from our public offering for general
corporate purposes, including expenses to set up a Wholly Foreign Owned Foreign
Enterprise (WFOE) in Nanyang City, Henan province, China, working capital,
application fees to receive EU standard approval, and marketing and sales
expenses, we will have broad discretion to adjust the application and allocation
of the net proceeds. Our expectations regarding future business needs may prove
to be inaccurate. Accordingly, we will retain broad discretion in the allocation
of the net proceeds from our public offering, and we reserve the right to change
the use of these proceeds as a result of contingencies. The success of our
operations is influenced by capital expenditures and working capital allocations
and will substantially depend upon our discretion and judgment with respect to
the application and allocation of the net proceeds from our public
offering.





TO
MAXIMIZE OUR POTENTIAL FOR FUTURE GROWTH AND ACHIEVE OUR EXPECTED REVENUES, WE
NEED TO MANAGE GROWTH IN OUR CURRENT OPERATIONS.





In order
to maximize potential growth, we believe that we must establish our
manufacturing and marketing operations. This will place a significant strain on
our management and on our operational, accounting, and information systems. We
expect that as we grow we will need to improve our financial controls, operating
procedures, and management information systems to handle increased operations.
We will also need to effectively train, motivate, and manage our employees. Our
failure to manage our growth could disrupt our operations and ultimately prevent
us from generating the revenues we expect.





WE CANNOT
ASSURE YOU THAT OUR ORGANIC GROWTH STRATEGY WILL BE SUCCESSFUL.





One of
our growth strategies is to grow organically by increasing the distribution and
sales of our products in new markets outside of China. However, many obstacles
to entering new markets exist, such as the costs associated with entering into
new markets, developing and implementing effective marketing efforts abroad and
maintaining attractive foreign exchange ratios. We cannot, therefore, assure you
that we will be able to successfully overcome such obstacles and establish our
products in any additional markets. Our inability to successfully implement our
organic growth strategy may have a negative impact on our growth strategy and on
our future financial condition, results of operations or cash
flows.





WE CANNOT
ASSURE YOU THAT OUR ACQUISITION GROWTH STRATEGY WILL BE SUCCESSFUL.





In
addition to our organic growth strategy we also expect to grow through strategic
acquisitions. We intend to pursue opportunities to acquire businesses that are
complementary or related to our existing product lines or may execute a
potential joint venture or acquisition with a silicon mine or other strategic
partner. We may not be able to locate suitable acquisition or joint venture
candidates at prices that we successfully consider appropriate. If we do
identify an appropriate candidate, we may not be able to successfully negotiate
the terms of an acquisition, finance the acquisition on terms that are
satisfactory to us or if the acquisition occurs successfully, integrate the
acquired business into our existing business. Acquisitions of businesses or
other material operations may require debt financing or additional equity
financing, resulting in leverage or dilution of ownership. Integration of
acquired business operations could disrupt our business by diverting management
away from day-to-day operations. The difficulties of integration may be
increased by the necessity of coordinating geographically dispersed
organizations, integrating personnel with disparate business backgrounds and
combining different corporate cultures. We also may not be able to maintain key
employees or customers of an acquired business or realize cost efficiencies or
synergies or other benefits we anticipated when selecting our acquisition
candidates. In addition, we may need to record write-downs from future
impairments of intangible assets, which could reduce our future reported
earnings. At times, acquisition candidates may have liabilities or adverse
operating issues that we fail to discover through due diligence prior to the
acquisition which will be required to comply with laws of the People's Republic
of China ("PRC"), to the extent applicable. There can be no assurance that any
proposed acquisition will be able to comply with PRC requirements, rules and/or
regulations, or that we will successfully obtain governmental approvals to the
extent required, which may be necessary to consummate such
acquisitions.


15





IF WE ARE
NOT ABLE TO IMPLEMENT OUR STRATEGIES TO ACHIEVE OUR BUSINESS OBJECTIVES, OUR
BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE MAY BE ADVERSELY
AFFECTED.





Our
business plan and growth strategy is based on currently prevailing circumstances
and the assumption that certain circumstances will or will not occur, as well as
the inherent risks and uncertainties involved in various stages of development.
However, there is no assurance that we will be successful in implementing our
strategies or that our strategies, even if implemented, will lead to the
successful achievement of our objectives. If we are not able to successfully
implement our strategies, our business operations and financial performance may
be adversely affected.





WE DEPEND
ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD ADVERSELY
AFFECT OUR BUSINESS.





We place
substantial reliance upon the efforts and abilities of our executive officers,
Wensheng Chen, our Founder and Chairman; Ling Chen, our President; Jun Ren, Vice
President - Operations; and Renmin Li, Vice President - Product Development
& Research. The loss of the services of any of our executive officers could
have a material adverse effect on our business, operations, revenues or
prospects. We do not maintain key man life insurance on the lives of these
individuals. Mr. Wensheng Chen has significant activities outside the company
that put demands on his time that could detract from his management of the
company’s business.





FAILURE
TO ATTRACT AND RETAIN PERSONNEL COULD HAVE AN ADVERSE IMPACT ON OUR
OPERATIONS.





Our
future success depends on our ability to identify, attract, hire, retain and
motivate other well-qualified managerial, technical, sales and marketing
personnel.  There is intense competition for these individuals, and
there can be no assurance that these professionals will be available in the
market or that we will be able to meet their compensation
requirements.





RISKS
RELATED TO OUR BUSINESS





OUR
PRODUCTS MUST BE CERTIFIED BY AUTHORITIES IN THE GEOGRAPHIC REGIONS IN WHICH WE
INTEND TO SEEK ORDERS





Initially
we intend to sell our products in the EU. Achieving EU standard certification is
a pre requisite for sales in the EU.





The
International Electrotechnical Commission (IEC) is an organization that prepares
and publishes International Standards for all electrical, electronic and related
technologies — collectively known as "electrotechnology". The IEC also manages
conformity assessment schemes that certify that equipment, systems or components
conform to its International Standards.





Kuong U
is currently applying for these certificates to achieve the EU standard for its
Photovoltaic Modules, model GYSP-175. To assist in securing an EU standard, the
company is having a prototype product tested by an independent testing facility.
On January 14, 2008, Kuong U entered an agreement with Arizona State University.
During the agreement, Photovoltaic Testing Laboratory at ASU will conduct
Crystalline Silicon Terrestrial Photovoltaic Modules - Design Qualification and
Type Approval (IEC 61215) tests and Photovoltaic module safety qualification
(IEC 61730-2) tests on Kuong U’s GYSP-175 photovoltaic modules. A total of ten
unconditioned production modules and one laminate (frameless modules) were sent
to the testing lab to complete the test program. Under the agreement, Kuong U
will pay $37,650 to ASU for its services. The agreement period is from January
10, 2008 to December 31, 2008.





One of
the few institutes in the EU that conducts test and issues EU standard
certifications is the VDE Testing & Certifications Institute in Germany
(VDE). If we achieve favorable test results from our ASU testing, the testing
lab will transfer a test data report to VDE Testing & Certifications
Institute in Germany. VDE is a professional organization of electrical
engineers; issues, in collaboration with German Institute for Standardization
(DIN), standards for the field of electrical engineering. It also conducts
testing and certification under the EU standard (much like UL in the United
States). According to http://www.vde.com, The VDE Testing and Certification
Institute is accredited on a national and international level for the area of
testing and certification of electrotechnical equipment, components and systems.
Testing of electrotechnical products is conducted for safety, electromagnetic
compatibility and other characteristics. The results of testing are evaluated
scientifically and contribute to the development of electrotechnical
standards.


16





Kuong U
contacted VDE directly and established an evaluation, to include the
construction evaluation requirements and testing services for VDE Certification
based on test report from ASU of IEC 61730-1 Photovoltaic module safety
qualification Part 1 (IEC 61730-1); 61730-2 module or materials tests, and
factory inspection requirement; and IEC61215. Total invoiced fees for VDE
certification and testing services are 7,956 EUR





If we
receive VDE standard certificates of IEC 61730-1, and 61730-2, and IEC 61215,
Kuong U would be able to market and sell its Photovoltaic Modules, GYSP-175, to
EU countries. However, there is not guarantee that we will receive VDE standard
certificates. Currently our anticipated sales of PV modules and solar lighting
systems do not require industry standard approval if sold to region in Africa
and Asia. Failure to achieve certification could limit our sales to these
regions.





SUPPLIERS
ARE CURRENTLY EXPERIENCING AN INDUSTRY-WIDE SHORTAGE OF SILICON INGOTS AND
WAFERS. THE PRICES THAT WE WOULD PAY FOR SILICON INGOTS AND WAFERS HAVE
INCREASED IN THE PAST AND WE EXPECT PRICES MAY CONTINUE TO INCREASE IN THE
FUTURE, WHICH MAY MATERIALLY AND ADVERSELY AFFECT OUR REVENUE GROWTH AND
DECREASE PROFIT MARGINS AND PROFITABILITY.





Silicon
ingots and wafers are an essential raw material in our production of wafers and
PV products. Silicon is created by refining quartz or sand, and is melted and
grown into crystalline ingots or other forms. Some of our potential suppliers
procure silicon ingots from companies that specialize in ingot growth and then
slice these ingots into wafers. We will depend on our suppliers for timely
delivery of silicon ingots and wafers in sufficient quantities and satisfactory
quality, and any disruption in supplies, including fluctuations in the delivery
of supplies or inability to obtain silicon ingots and wafers at an acceptable
cost or at all, will materially and adversely affect our business and
operations.





There is
currently an industry-wide shortage of silicon ingots and silicon wafers, which
has resulted in significant price increases. The average prices of silicon
ingots and silicon wafers may continue to increase. Moreover, we expect the
shortages of silicon ingots and silicon wafers to continue as the solar power
industry continues to grow and as additional manufacturing capacity is added.
Silicon wafers are also used in the semiconductor industry generally and any
increase in demand from that sector will exacerbate the current shortage. The
production of silicon ingots and silicon wafers are capital intensive and adding
manufacturing capacity requires significant lead time. While we are aware that
several new facilities for the manufacture of silicon ingots and silicon wafers
are under construction and many existing facilities are expanding their
production capacities, we do not believe that the supply shortage will be
remedied in the near term. We expect that the demand for silicon ingots and
silicon wafers will continue to outstrip supply for the foreseeable
future.





Since
some suppliers do not themselves manufacture silicon but instead purchase their
requirements from other vendors, it is possible that these suppliers will not be
able to obtain sufficient silicon to satisfy our requirements. In addition,
companies in the PV industry will compete with companies in the semiconductor
industry for silicon ingots and wafers, and companies in that sector typically
have greater purchasing power and market influence than companies in the PV
industry. If we acquire ingots and silicon wafers from suppliers through
short-term supply arrangements we would be subject to the risk that our
suppliers may cease supplying silicon ingots and silicon wafers to us for any
reason, including due to uncertainties in their financial viability. These
suppliers could also choose not to honor such contracts. If either of these
circumstances occurs, our supply of critical raw materials at reasonable costs
and our basic ability to conduct our business could be severely restricted.
Moreover, since some of our supply contracts may require prepayment of a
substantial portion of the contract price, we may not be able to recover such
prepayments and we would suffer loses should such suppliers fail to fulfill
their delivery obligations under the contracts. Furthermore, if we do not fix
the price for the silicon ingots and silicon wafers under supply contracts, the
price we will need to pay may need to be adjusted to reflect the prevailing
market price around the time of delivery, which may be higher than we expect.
Increases in the prices of silicon ingots and silicon wafers could increase our
production costs and may materially and adversely impact our cost of revenue,
gross margins and profitability.





There are
a limited number of silicon ingot and silicon wafer suppliers, and many of our
potential competitors also purchase silicon ingots and silicon wafers from these
suppliers. Our potential competitors may have longer and stronger relationships
with these suppliers than we do. Our potential competitors may also have in
place multi-year supply agreements with these suppliers with longer terms and
may be able to obtain silicon ingots and silicon wafers at a lower cost than we
do. Moreover, the inability to obtain silicon ingots and silicon wafers at
commercially reasonable prices or at all would harm our ability to meet existing
and future customer demand for our products, and could cause us to make fewer
shipments, lose customers and market share and generate lower than anticipated
revenue, thereby materially and adversely affecting our business, financial
condition, results of operations and prospects.


17




IF PV
TECHNOLOGY IS NOT SUITABLE FOR WIDESPREAD ADOPTION, OR SUFFICIENT DEMAND FOR PV
PRODUCTS DOES NOT DEVELOP OR TAKES LONGER TO DEVELOP THAN WE ANTICIPATED, OUR
SALES MAY NOT CONTINUE TO INCREASE OR MAY EVEN DECLINE, AND WE MAY BE UNABLE TO
SUSTAIN PROFITABILITY.





The PV
market is at a relatively early stage of development and the extent to which PV
products will be widely adopted is uncertain. Market data in the PV industry are
not as readily available as those in other more established industries where
trends can be assessed more reliably from data gathered over a longer period of
time. If PV technology proves unsuitable for widespread adoption or if demand
for PV products fails to develop sufficiently, we may not be able to grow our
business or generate sufficient revenues to achieve profitability. In addition,
demand for PV products in our targeted markets, including China, may not develop
or may develop to a lesser extent than we anticipated. Many factors may affect
the viability of widespread adoption of PV technology and demand for PV
products, including:





•
            availability
      of government subsidies and incentives to support the development of the
      PV industry;





•
            cost-effectiveness
      of PV products compared to conventional and other non-solar energy sources
      and products;





•
            performance
      and reliability of PV products compared to conventional and other
      non-solar energy sources and
products;





•
            success
      of other alternative energy generation technologies, such as fuel cells,
      wind power and biomass;





•
            fluctuations
      in economic and market conditions that affect the viability of
      conventional and non-solar alternative energy sources, such as increases
      or decreases in the prices of oil, coal, natural gas and other fossil
      fuels;





•
            the
      cost and availability of credit, loans and other funding mechanisms to
      finance the installation and maintenance of PV systems. For example, a
      rise in interest rates would likely render existing financings more
      expensive and be an obstacle for potential financings that would otherwise
      spur the growth of the PV industry;





•
            capital
      expenditures by end users of PV products, which tend to decrease when the
      economy slows down; and





•
            deregulation
      of the electric power industry and broader energy
  industry.





WE
POTENTIALLY FACE INTENSE COMPETITION FROM OTHER COMPANIES PRODUCING SOLAR ENERGY
AND OTHER RENEWABLE ENERGY PRODUCTS.





The PV
market is intensely competitive and rapidly evolving. According to Photon
International’s survey in March 2006, as of the end of 2005, 94 companies in the
world produced PV cells and 153 companies produced PV modules. Many of our
potential competitors have established more prominent market positions, and if
we fail to attract and retain customers and establish successful distribution
networks in our target markets for our products, we will be unable to generate
sales. Our competitors include PV divisions of large conglomerates such as Royal
Sanyo Group and Sharp Corporation, specialized cell manufacturers such as
Q-Cells AG, as well as integrated manufacturers of PV products such as Renewable
Energy Corporation and SolarWorld AG. Some of our potential competitors have
also become vertically integrated, from upstream silicon wafer manufacturing to
PV system integration. We expect to compete with future entrants to the PV
market that offer new technological solutions. We may also face competition from
semiconductor manufacturers, a few of which have already announced their
intention to start production of PV cells. Many of our potential competitors are
developing or currently producing products based on new PV technologies,
including thin film, ribbon, sheet and nano technologies, which they believe
will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from
conventional and non-solar renewable energy technologies. Due to the relatively
high manufacturing costs compared to most other energy sources, solar energy is
generally not competitive without government incentive
programs.


18




Most of
our potential competitors have substantially greater financial, technical,
manufacturing and other resources than we do. Greater size in some cases
provides them with a competitive advantage with respect to manufacturing costs
because of their economies of scale and their ability to purchase raw materials
at lower prices. For example, those companies that also manufacture
semiconductors may source both semiconductor grade silicon wafers and solar
grade silicon wafers from the same supplier. As a result, those companies may
have stronger bargaining power with the supplier and have an advantage over us
in negotiating favorable pricing, as well as securing silicon ingot and silicon
wafer supplies at times of shortages. Many of our potential competitors also
have greater brand name recognition, more established distribution networks and
larger customer bases. In addition, many of our potential competitors have
well-established relationships with our current and potential distributors and
have extensive knowledge of our target markets. As a result, they may be able to
devote greater resources to the research, development, promotion and sale of
their products or respond more quickly to evolving industry standards and
changes in market conditions than we can. Our failure to adapt to changing
market conditions and to compete successfully with existing or new entrants may
materially and adversely affect our financial condition and results of
operations. Our failure to develop and introduce new PV products could render
our products uncompetitive or obsolete, and reduce our sales and market
share.





The PV
industry is rapidly evolving and competitive. We will need to invest significant
financial resources in research and development to keep pace with technological
advances in the PV industry and to effectively compete in the future. However,
research and development activities are inherently uncertain, and we might
encounter practical difficulties in commercializing our research results. Our
significant expenditures on research and development may not reap corresponding
benefits. A variety of competing PV technologies that other companies may
develop could prove to be more cost-effective and have better performance than
our PV products. Therefore, our development efforts may be rendered obsolete by
the technological advances of others. Breakthroughs in PV technologies that do
not use crystalline silicon could mean that companies such as us that currently
rely entirely on crystalline silicon would encounter a sudden, sharp drop in
sales. Our failure to develop and introduce new PV products could render our
products uncompetitive or obsolete, and result in a decline in our market
share.





INTENSE
COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY.





We
compete with other companies, many of whom are developing, or can be expected to
develop, products similar to ours. Some of our competitors are more established
than we are, and have significantly greater financial, technical, marketing and
other resources than we presently possess. Some of our competitors have greater
name recognition and a larger customer base. These competitors may be able to
respond more quickly to new or changing opportunities and customer requirements
and may be able to undertake more extensive promotional activities, offer more
attractive terms to customers, and adopt more aggressive pricing policies. We
intend to create greater brand awareness for our brand name so that we can
successfully compete with our competitors. We cannot assure you that we will be
able to compete effectively with current or future competitors or that the
competitive pressures we face will not harm our business.





OUR
DEPENDENCE ON A LIMITED NUMBER OF SUPPLIERS FOR A SUBSTANTIAL PORTION OF SILICON
INGOTS AND SILICON WAFERS COULD PREVENT US FROM DELIVERING OUR PRODUCTS IN A
TIMELY MANNER TO OUR CUSTOMERS IN THE REQUIRED QUANTITIES, WHICH COULD RESULT IN
ORDER CANCELLATIONS, DECREASED REVENUE AND LOSS OF MARKET SHARE.





From
company inception to April 30, 2008, we have not purchased any silicon ingots
and silicon wafers. We plan to purchase silicon wafer from Suntech Power
Holdings Co.(NYSE:STP), Motech Industries, Inc. and JA Solar Holding (NASDAQ:
JASO). To develop or secure our relationships with these suppliers, we may
extend interest-free loans or make prepayments to them, or grant them warrants
or other rights to purchase our ordinary shares, which could increase our costs
or expenses. If we fail to develop or maintain our relationships with these or
our other suppliers, we may be unable to manufacture our products, our products
may only be available at a higher cost or after a long delay, or we could be
prevented from delivering our products to our customers in the required
quantities, at competitive prices and on acceptable terms of delivery. Problems
of this kind could cause us to experience order cancellations, decreased revenue
and loss of market share. In general, the failure of a supplier to supply
materials and components that meet our quality, quantity and cost requirements
in a timely manner due to lack of supplies or other reasons could impair our
ability to manufacture our products or could increase our costs, particularly if
we are unable to obtain these materials and components from alternative sources
in a timely manner or on commercially reasonable terms. We cannot assure you
that we will not experience shortfalls of silicon ingots or silicon wafers from
our suppliers in the future or that, in the event of such shortfalls, we will be
able to find other silicon ingots and silicon wafers suppliers to satisfy our
production needs. Any disruption in the supply of silicon wafers to us may
adversely affect our business, financial condition, results of operations and
business prospects.


19




OUR
DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS MAY CAUSE SIGNIFICANT FLUCTUATIONS
OR DECLINES IN OUR REVENUES.





We plan
to sell a substantial portion of our wafers and PV products to a limited number
of customers, including distributors, engineering design firms, system
integrators, other value-added resellers, as well as integrated manufacturers of
PV products. To date, we have not had any customers nor any sales. We plan to
conduct our sales to customers typically through non-exclusive, short-term
arrangements where the contract prices are typically agreed upon between our
customers and us on a quarterly basis, and as such, our actual revenues can vary
significantly. We anticipate that our dependence on a limited number of
customers would continue for the foreseeable future. Consequently, any one of
the following events may cause material fluctuations or declines in our revenues
and have a material adverse effect on our results of operations:





·
            reduction,
      delay or cancellation of orders from one or more significant
      customers;





·
            selection
      by one or more significant customers of products competitive with
      ours;





·
            loss
      of one or more significant customers and our failure to identify
      additional or replacement customers;
and





·
            failure
      of any significant customers to make timely payment for our
      products.





CHANGES
TO EXISTING REGULATIONS OVER THE UTILITY SECTOR AND THE PV INDUSTRY MAY PRESENT
TECHNICAL, REGULATORY AND ECONOMIC BARRIERS TO THE PURCHASE AND USE OF PV
PRODUCTS, WHICH MAY SIGNIFICANTLY REDUCE DEMAND FOR OUR PRODUCTS.





The
market for power generation products is heavily influenced by government
regulations and policies concerning the electric utility industry, as well as
the internal policies of electric utilities companies. These regulations and
policies often relate to electricity pricing and technical interconnection of
end user-owned power generation. In a number of countries, these regulations and
policies are being modified and may continue to be modified. End users’
purchases of alternative energy sources, including PV products, could be
deterred by these regulations and policies, which could result in a significant
reduction in the potential demand for our PV products. For example, utility
companies commonly charge fees to larger, industrial customers for disconnecting
from the electricity transmission grid or for having the capacity to use power
from the electricity transmission grid for back-up purposes. These fees could
increase end users’ costs of using our PV products and make our PV products less
desirable, thereby having an adverse effect on our business, prospects, results
of operations and financial condition.





We
anticipate that our PV products and their installation will be subject to
oversight and regulation in accordance with national and local ordinances
relating to building codes, safety, environmental protection, utility
interconnection and metering and related matters in various countries. It is
also burdensome to track the requirements of individual localities and design
equipment to comply with the varying standards. Any new government regulations
or utility policies pertaining to our PV products may result in significant
additional expenses to us, our distributors and end users and, as a result,
could cause a significant reduction in demand for our PV products.




20








Almost
all of our solar cells sold are eventually utilized in the on-grid market, where
the solar power systems are connected to the utility grid and generate
electricity to feed into the grid. We believe that the near-term growth of the
market for on-grid applications depends in large part on the availability and
size of government subsidies and economic incentives. The reduction or
elimination of subsidies and economic incentives may adversely affect the growth
of this market or result in increased price competition, either of which could
cause our revenues to decline.





Today,
when upfront system costs are factored into cost per kilowatt, the cost of solar
power substantially exceeds the cost of power furnished by the electric utility
grid in many locations. As a result, national and local governmental bodies in
many countries, most notably in Germany, Spain, Italy, the United States and
China, have provided subsidies and economic incentives in the form of feed-in
tariffs, rebates, tax credits and other incentives to distributors, system
integrators and manufacturers of solar power products to promote the use of
solar energy in on-grid applications and to reduce dependence on other forms of
energy. These government economic incentives could potentially be reduced or
eliminated altogether. For example, Germany has been a strong supporter of solar
power products and systems, and is a significant market for our customers that
engage in solar module and system integration businesses. Utilities in Germany
are generally obligated to purchase electricity generated from grid-connected
solar power systems at defined feed-in tariff rates, which will decline over
time according to a predetermined schedule. Specifically, German subsidies
decline at a rate of 5.0% to 6.5% per year for systems installed after 2006
based on the type and size of the solar power systems, and discussions are
currently underway about amending the incentives for solar power systems under
the German Renewable Energy Law. Any political or market changes in Germany
could result in significant reductions or eliminations of subsidies or economic
incentives, such as a more accelerated reduction of feed-in tariffs than as
planned according to the current schedule. The solar power industry is currently
moving towards the economies of scale necessary for solar power to become
cost-effective in a non-subsidized market. Reductions in, or eliminations of,
subsidies and economic incentives for on-grid solar energy applications could
result in decreased demand for our products and cause our revenues to
decline.





WE MAY
INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH U.S. CORPORATE GOVERNANCE AND
ACCOUNTING REQUIREMENTS.





We may
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission and the NASDAQ
OTCBB. We expect all of these applicable rules and regulations to increase our
legal and financial compliance costs and to make some activities more
time-consuming and costly. We also expect that these applicable rules and
regulations may make it more difficult and more expensive for us to obtain
director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for us to
attract and retain qualified individuals to serve on our board of directors or
as executive officers. We are currently evaluating and monitoring developments
with respect to these newly applicable rules, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of such
costs.





PROBLEMS
WITH PRODUCT QUALITY OR PRODUCT PERFORMANCE MAY CAUSE US TO INCUR WARRANTY
EXPENSES, DAMAGE OUR MARKET REPUTATION AND PREVENT US FROM ACHIEVING INCREASED
SALES AND MARKET SHARE.





The PV
modules we plan to sell are typically sold with a 20 year warranty and 1-year
warranty for defects in materials and workmanship, respectively. The PV modules
may also contain a 10 year and 20 year warranty against declines of more than
8.0% and 10.0% of initial power generation capacity, respectively. As a result
of these warranties, we would bear the risk of extensive warranty claims long
after we have sold our products and recognized revenues. We have not retained
any third party insurance to cover certain warranty-related claims on our
products. We have not sold any PV modules since inception, and accordingly none
of our PV modules has been in use for more than five years. Because our products
have not been in use, we cannot assure you that our assumptions regarding the
durability and reliability of our products are reasonable. Our warranty
provisions in future may be inadequate, and we may have to incur substantial
expense to repair or replace defective products in the future. Furthermore,
widespread product failures may damage our market reputation and cause our sales
to decline.




21


WE HAVE
LIMITED INSURANCE COVERAGE AND MAY INCUR LOSSES RESULTING FROM PRODUCT LIABILITY
CLAIMS OR BUSINESS INTERRUPTIONS.


If we
secure any PV product sales, we would be exposed to risks associated with
product liability claims in the event that the use of the PV products sold
results in injury. Since our proposed products are electricity producing
devices, it is possible that users could be injured or killed by the products,
whether by product malfunctions, defects, improper installation or other causes.
We have not sold any products and, due to limited historical experience, we are
unable to predict whether product liability claims will be brought against us in
the future or the effect of any resulting adverse publicity on our business.
Moreover, we may have only limited product liability insurance and may not have
adequate resources to satisfy a judgment in the event of a successful claim
against us. The successful assertion of product liability claims against us
could result in potentially significant monetary damages and require us to make
significant payments. In addition, as the insurance industry in China is still
in an early stage of development, business interruption insurance available in
China offers limited coverage compared to that offered in many other
countries.





LEGISLATIVE
AND REGULATORY ACTIONS AND POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS, INCLUDING
SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002, ARE LIKELY TO IMPACT OUR FUTURE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





There
have been certain regulatory changes, including the Sarbanes-Oxley Act of 2002,
and there may potentially be new accounting pronouncements or additional
regulatory changes, which will have an impact on our future financial condition
and results of operations.  The Sarbanes-Oxley Act of 2002 and other
rule changes as well as proposed legislative initiatives will increase our
general and administrative costs, as we will incur increased legal and
accounting fees to comply with such rule changes.  In addition,
proposed initiatives are expected to result in changes in certain accounting and
disclosure rules.  These and other potential changes could materially
increase the expenses we report in our financial statements and adversely affect
our operating results.





Section
404 of the Sarbanes-Oxley Act of 2002 requires management to assess its internal
controls over financial reporting and requires auditors to attest to that
assessment. Current regulations of the Securities and Exchange Commission will
require us to (1) include this assessment in our Annual Report on Form 10-K
commencing with the annual report for our fiscal year ending December 31, 2009,
and (2) include this attestation in our Annual Report on Form 10-K commencing
with the annual report for our fiscal year ending December 31,
2009.





We will
incur significant increased costs in implementing and responding to the new
requirements. In particular, the rules governing the standards that must be met
for management to assess its internal controls over financial reporting under
Section 404 are complex and require significant documentation, testing and
possible remediation. Our process of reviewing, documenting and testing our
internal controls over financial reporting may cause a significant strain on our
management, information systems and resources. We will have to invest in
additional accounting and software systems. We may be required to hire
additional personnel and to use outside legal, accounting and advisory services.
We will also incur additional fees from our auditors as they perform the
additional services necessary for them to provide their attestation. If we are
unable to favorably assess the effectiveness of our internal controls over
financial reporting when we are required, or if our independent auditors are
unable to provide an unqualified attestation report on such assessment, we may
be required to change our internal controls over financial reporting to
remediate deficiencies. In addition, investors may lose confidence in the
reliability of our financial statements causing our stock price to
decline.





ACTS OF
TERRORISM, RESPONSES TO ACTS OF TERRORISM AND ACTS OF WAR MAY IMPACT OUR
BUSINESS AND OUR ABILITY TO RAISE CAPITAL.





Future
acts of war or terrorism, national or international responses to such acts, and
measures taken to prevent such acts may harm our ability to raise capital or our
ability to operate, especially to the extent we depend upon activities conducted
in foreign countries, such as China.  In addition, the threat of
future terrorist acts or acts of war may have effects on the general economy or
on our business that are difficult to predict.  We are not insured
against damage or interruption of our business caused by terrorist acts or acts
of war.





RISKS
RELATING TO THE PEOPLE'S REPUBLIC OF CHINA





CURRENCY
CONVERSION AND EXCHANGE RATE VOLATILITY COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION.




The PRC
government imposes control over the conversion of Renminbi into foreign
currencies. Under the current unified floating exchange rate system, the
People's Bank of China publishes an exchange rate, which we refer to as the
People's Bank of China exchange rate, based on the previous day's dealings in
the inter-bank foreign exchange market. Financial institutions authorized to
deal in foreign currency may enter into foreign exchange transactions at
exchange rates within an authorized range above or below the People's Bank of
China exchange rate according to market conditions. Pursuant to the Foreign
Exchange Control Regulations of the PRC issued by the State Council which came
into effect on April 1, 1996, and the Regulations on the Administration of
Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect
on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into
foreign exchange by Foreign Investment Enterprises, for use on current account
items, including the distribution of and profits to foreign investors, is
permissible. Conversion of Renminbi into foreign currencies for capital account
items, including direct investment, loans, and security investment, is still
under certain restrictions. On January 14, 1997, the State Council amended the
Foreign Exchange Control Regulations and added, among other things, an important
provision, which provides that the PRC government shall not impose restrictions
on recurring international payments and transfers under current account
items.


22




Enterprises
in the PRC (including Foreign Investment Enterprises) which require foreign
exchange for transactions relating to current account items, may, without
approval of the State Administration of Foreign Exchange, or SAFE, effect
payment from their foreign exchange account or convert and pay at the designated
foreign exchange banks by providing valid receipts and proofs.





TO THE
EXTENT OUR ASSETS ARE LOCATED IN CHINA, ANY DIVIDENDS OR PROCEEDS FROM
LIQUIDATION IS SUBJECT TO THE APPROVAL OF THE RELEVANT CHINESE GOVERNMENT
AGENCIES.





If we
pursue our plan to set up a WFOE in Nanyang city, Henan province, China, our
assets will be predominantly located inside China. Under the laws governing
foreign invested enterprises in China, dividend distribution and liquidation are
allowed but subject to special procedures under the relevant laws and rules. Any
dividend payment will be subject to the decision of the board of directors and
subject to foreign exchange rules governing such repatriation. Any liquidation
is subject to both the relevant government agency's approval and supervision as
well the foreign exchange control. This may generate additional risk for our
investors in case of dividend payment and liquidation.





CHINA’S
ECONOMIC POLICIES COULD AFFECT OUR BUSINESS.





To the
extent our assets will be located in China and to the extent our revenue will be
derived from our operations in China, our results of business and prospects
would be subject to the economic, political and legal developments in
China.





While
China's economy has experienced a significant growth in the past twenty years,
growth has been irregular, both geographically and among various sectors of the
economy. The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall economy of China, but may also have a negative effect on us.
For example, our sales results and financial condition may be adversely affected
by the government control over capital investments or changes in tax regulations
with our future customers.





The
economy of China has been transitioning from a planned economy to a more
market-oriented economy. In recent years the Chinese government has implemented
measures emphasizing the utilization of market forces for economic reform and
the reduction of state ownership of productive assets and the establishment of
corporate governance in business enterprises; however, a substantial portion of
productive assets in China are still owned by the Chinese government. In
addition, the Chinese government continues to play a significant role in
regulating industry development by imposing industrial policies. It also
exercises significant control over China's economic growth through the
allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to
particular industries or companies.





WE MAY
FACE OBSTACLES FROM THE COMMUNIST SYSTEM IN THE PEOPLE'S REPUBLIC OF
CHINA.





Foreign
companies conducting operations in The People's Republic of China face
significant political, economic and legal risks. The Communist regime in The
People's Republic of China includes a stifling bureaucracy which may hinder
Western investment.





WE MAY
HAVE DIFFICULTY ESTABLISHING ADEQUATE MANAGEMENT, LEGAL AND FINANCIAL CONTROLS
IN THE PEOPLE'S REPUBLIC OF CHINA.





The
People's Republic of China historically has been deficient in Western style
management and financial reporting concepts and practices, as well as in modern
banking, computer and other control systems. We may have difficulty in hiring
and retaining a sufficient number of qualified employees to work in The People's
Republic of China if we set up a wholly foreign owned enterprises (WFOE) in
China. As a result of these factors, we may experience difficulty in
establishing management, legal and financial controls, collecting financial data
and preparing financial statements, books of account and corporate records and
instituting business practices that meet Western standards.




23





BECAUSE
OUR ASSETS AND OPERATIONS MIGHT BE LOCATED IN CHINA, YOU MAY HAVE DIFFICULTY
ENFORCING ANY CIVIL LIABILITIES AGAINST US UNDER THE SECURITIES AND OTHER LAWS
OF THE UNITED STATES OR ANY STATE.





We are a
holding company, and all of our assets might be located in the Republic of
China. In addition, our directors and officers are non-residents of the United
States, and all or a substantial portion of the assets of these non-residents
are located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon these
non-residents, or to enforce against them judgments obtained in United States
courts, including judgments based upon the civil liability provisions of the
securities laws of the United States or any state.





There is
uncertainty as to whether courts of the Republic of China would
enforce:





·
            Judgments
      of United States courts obtained against us or these non-residents based
      on the civil liability provisions of the securities laws of the United
      States or any state; or





·
            In
      original actions brought in the Republic of China, liabilities against us
      or non-residents predicated upon the securities laws of the United States
      or any state. Enforcement of a foreign judgment in the Republic of China
      also may be limited or otherwise affected by applicable bankruptcy,
      insolvency, liquidation, arrangement, moratorium or similar laws relating
      to or affecting creditors' rights generally and will be subject to a
      statutory limitation of time within which proceedings may be
      brought.





THE PRC
LEGAL SYSTEM EMBODIES UNCERTAINTIES, WHICH COULD LIMIT LAW ENFORCEMENT
AVAILABILITY.





The PRC
legal system is a civil law system based on written statutes. Unlike common law
systems, decided legal cases have little precedence. In 1979, the PRC government
began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. The overall effect of legislation over the past 27
years has significantly enhanced the protections afforded to various forms of
foreign investment in China. Each of our PRC operating subsidiaries and
affiliates is subject to PRC laws and regulations. However, these laws and
regulations change frequently and the interpretation and enforcement involve
uncertainties. For instance, we may have to resort to administrative and court
proceedings to enforce the legal protection that we are entitled to by law or
contract. However, since PRC administrative and court authorities have
significant discretion in interpreting statutory and contractual terms, it may
be difficult to evaluate the outcome of administrative court proceedings and the
level of law enforcement that we would receive in more developed legal systems.
Such uncertainties, including the inability to enforce our contracts, could
affect our business and operation. In addition, intellectual property rights and
confidentiality protections in China may not be as effective as in the United
States or other countries. Accordingly, we cannot predict the effect of future
developments in the PRC legal system, particularly with regard to the industries
in which we operate, including the promulgation of new laws. This may include
changes to existing laws or the interpretation or enforcement thereof, or the
preemption of local regulations by national laws. These uncertainties could
limit the availability of law enforcement, including our ability to enforce our
agreements with the government entities and other foreign
investors.





ANY
DIVIDENDS AND OTHER DISTRIBUTIONS FROM ANY SUBSIDIARIES IN CHINA IS SUBJECT TO
VARIOUS LEGAL AND CONTRACTUAL RESTRICTIONS AND UNCERTAINTIES, AND OUR ABILITY TO
PAY DIVIDENDS OR MAKE OTHER DISTRIBUTIONS TO OUR SHAREHOLDERS ARE NEGATIVELY
AFFECTED BY THOSE RESTRICTIONS AND UNCERTAINTIES.




24





We plan
to operate manufacturing facilities in Nanyang city, Henan province in China
through PRC subsidiaries.  As a result, our profits available for
distribution to our shareholders are dependent on the profits available for
distribution from PRC subsidiaries.  If the subsidiary incurs debt on
its own behalf, the debt instruments may restrict its ability to pay dividends
or make other distributions, which in turn would limit our ability to pay
dividends on our shares.  Under the current PRC laws, because we are
incorporated in the Nevada, any PRC subsidiaries would be regarded as
Sino-foreign joint venture enterprises in China.  Although dividends
paid by foreign invested enterprises, such as wholly foreign-owned enterprises
and Sino-foreign joint ventures, are not subject to any PRC corporate
withholding tax, the PRC laws permit payment of dividends only out of net income
as determined in accordance with PRC accounting standards and
regulations.  Determination of net income under PRC accounting
standards and regulations may differ from determination under U.S. GAAP in
significant aspects, such as the use of different principles for recognition of
revenues and expenses.  In addition, if we make additional capital
contributions to PRC subsidiaries, (which may occur through the capitalization
of undistributed profits), then additional approval of the PRC government would
be required due to an increase in our registered capital and total investment
..  Under the PRC laws, a Sino-foreign joint venture enterprise is
required to set aside a portion of its net income each year to fund designated
statutory reserve funds.  These reserves are not distributable as cash
dividends.  As a result, our primary internal source of funds of
dividend payments from PRC subsidiaries are subject to these and other legal and
contractual restrictions and uncertainties, which in turn may limit or impair
our ability to pay dividends to our shareholders.  Moreover, any
transfer of funds from us to PRC subsidiaries, either as a shareholder loan or
as an increase in registered capital, is subject to registration with or
approval by PRC governmental authorities. We currently do not intend on paying
any dividends in the future and expect to retain all available funds to support
our operations and to finance growth and development of our business. We have
never declared dividends or paid cash dividends.  Our board of
directors will make any future decisions regarding dividends.  We
currently intend to retain and use any future earnings for the development and
expansion of our business and do not anticipate paying any cash dividends in the
near future.  Therefore, any gains on an investment in our common
stock will likely occur through an increase in our stock price, which may or may
not occur.





FAILURE
TO COMPLY WITH PRC REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL
PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT STOCKHOLDERS TO
PERSONAL LIABILITY, LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES OR TO INJECT
CAPITAL INTO OUR PRC SUBSIDIARIES, LIMIT OUR PRC SUBSIDIARIES’ ABILITY TO
DISTRIBUTE PROFITS TO US OR OTHERWISE MATERIALLY ADVERSELY AFFECT
US.





In
October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued
the Notice on Relevant Issues in the Foreign Exchange Control over Financing and
Return Investment Through Special Purpose Companies by Residents Inside China,
generally referred to as Circular 75, which required PRC residents to register
with the competent local SAFE branch before establishing or acquiring control
over an offshore special purpose company, or SPV, for the purpose of engaging in
an equity financing outside of China on the strength of domestic PRC assets
originally held by those residents. Internal implementing guidelines issued by
SAFE, which became public in June 2007 (known as Notice 106), expanded the reach
of Circular 75 by (1) purporting to cover the establishment or acquisition of
control by PRC residents of offshore entities which merely acquire "control"
over domestic companies or assets, even in the absence of legal ownership; (2)
adding requirements relating to the source of the PRC resident's funds used to
establish or acquire the offshore entity; (i) covering the use of existing
offshore entities for offshore financings; (3) purporting to cover situations in
which an offshore SPV establishes a new subsidiary in China or acquires an
unrelated company or unrelated assets in China; and (4) making the domestic
affiliate of the SPV responsible for the accuracy of certain documents which
must be filed in connection with any such registration, notably, the business
plan which describes the overseas financing and the use of proceeds. Amendments
to registrations made under Circular 75 are required in connection with any
increase or decrease of capital, transfer of shares, mergers and acquisitions,
equity investment or creation of any security interest in any assets located in
China to guarantee offshore obligations, and Notice 106 makes the offshore SPV
jointly responsible for these filings. In the case of an SPV which was
established, and which acquired a related domestic company or assets, before the
implementation date of Circular 75, a retroactive SAFE registration was required
to have been completed before March 31, 2006; this date was subsequently
extended indefinitely by Notice 106, which also required that the registrant
establish that all foreign exchange transactions undertaken by the SPV and its
affiliates were in compliance with applicable laws and regulations. Failure to
comply with the requirements of Circular 75, as applied by SAFE in accordance
with Notice 106, may result in fines and other penalties under PRC laws for
evasion of applicable foreign exchange restrictions. Any such failure could also
result in the SPV's affiliates being impeded or prevented from distributing
their profits and the proceeds from any reduction in capital, share transfer or
liquidation to the SPV, or from engaging in other transfers of funds into or out
of China.




25





We
believe our stockholders who are PRC residents as defined in Circular 75 have
registered with the relevant branch of SAFE, as currently required, in
connection with their equity interests in us and our acquisitions of equity
interests in our PRC subsidiaries.  However, we cannot provide any
assurances that their existing registrations have fully complied with, and they
have made all necessary amendments to their registration to fully comply with,
all applicable registrations or approvals required by Circular
75.  Moreover, because of uncertainty over how Circular 75 will be
interpreted and implemented, and how or whether SAFE will apply it to us, we
cannot predict how it will affect our business operations or future
strategies.  For example, our present and prospective PRC
subsidiaries' ability to conduct foreign exchange activities, such as the
remittance of dividends and foreign currency-denominated borrowings, may be
subject to compliance with Circular 75 by our PRC resident beneficial
holders.  In addition, such PRC residents may not always be able to
complete the necessary registration procedures required by Circular
75.  We also have little control over either our present or
prospective direct or indirect stockholders or the outcome of such registration
procedures.  A failure by our PRC resident beneficial holders or
future PRC resident stockholders to comply with Circular 75, if SAFE requires
it, could subject these PRC resident beneficial holders to fines or legal
sanctions, restrict our overseas or cross-border investment activities, limit
our subsidiaries' ability to make distributions or pay dividends or affect our
ownership structure, which could adversely affect our business and
prospects.





The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and RMB, and between those currencies and other currencies in which our
sales may be denominated.  For example, if we need to convert U.S.
dollars into RMB for our operational needs and the RMB appreciates against the
U.S. dollar at that time, our financial position, our business, and the price of
our common stock may be harmed.  Conversely, if we decide to convert
our RMB into U.S. dollars for the purpose of declaring dividends on our common
stock or for other business purposes and the U.S. dollar appreciates against the
RMB, the U.S. dollar equivalent of our earnings from our subsidiaries in China
would be reduced.





IF THE
CHINA SECURITIES REGULATORY COMMISSION, OR CSRC, OR ANOTHER PRC REGULATORY
AGENCY, DETERMINES THAT CSRC APPROVAL IS REQUIRED IN CONNECTION WITH OUR PUBLIC
OFFERING, OUR PUBLIC OFFERING MAY BE DELAYED OR CANCELLED, OR WE MAY BECOME
SUBJECT TO PENALTIES.





On August
8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the
Regulation on Mergers and Acquisitions of Domestic Companies by Foreign
Investors, which became effective on September 8, 2006. This new regulation,
among other things, has certain provisions that require SPVs formed for the
purpose of acquiring PRC domestic companies and controlled by PRC individuals,
to obtain the approval of the CSRC prior to publicly listing their securities on
an overseas stock market.  However, the new regulation does not
expressly provide that approval from the CSRC is required for the offshore
listing of a SPV which acquires, directly or indirectly, equity interest or
shares of domestic PRC entities held by domestic companies or individuals by
cash payment, nor does it expressly provide that approval from CSRC is not
required for the offshore listing of a SPV which has fully completed its
acquisition of equity interest of domestic PRC equity prior to September 8,
2006.  On September 21, 2006, the CSRC published on its official
website a notice specifying the documents and materials that are required to be
submitted for obtaining CSRC approval.  It is not clear whether the
provisions in the new regulation regarding the offshore listing and trading of
the securities of a SPV applies to an offshore company such as us which has
acquired the equity interest of PRC domestic entities in cash and has completed
the acquisition of the equity interest of PRC domestic entities prior to the
effective date of the new regulation.  Since the new regulation has
only recently been adopted, there remains some uncertainty as to how this
regulation will be interpreted or implemented.  Although the CSRC or
another PRC regulatory agency has not determined that CSRC approval is required
for our public offering, if the CSRC or another PRC regulatory agency
subsequently determines that the CSRC's approval is required, we may face
sanctions by the CSRC or another PRC regulatory agency. If this happens, these
regulatory agencies may impose fines and penalties on our operations in the PRC,
limit our operating privileges in the PRC, delay or restrict the repatriation of
the proceeds from our public offering into the PRC, restrict or prohibit payment
or remittance of dividends to us or take other actions that could have a
material adverse effect on our business, financial condition, results of
operations, reputation and prospects, as well as the trading price of our
shares. The CSRC or other PRC regulatory agencies may also take actions
requiring us, or making it advisable for us, to delay or cancel our public
offering before settlement and delivery of the shares being offered by
us.





NEW
CORPORATE INCOME TAX LAW COULD ADVERSELY AFFECT OUR BUSINESS AND OUR NET
INCOME.





On March
16, 2007, National People's Congress passed a new corporate income tax law,
which will be effective on January 1, 2008.  This new corporate income
tax unifies the corporate income tax rate, cost deductions and tax incentive
policies for both domestic and foreign-invested enterprises in
China.  According to the new corporate income tax law, the applicable
corporate income tax rate of our Chinese subsidiaries will incrementally
increase to 25% over a five-year period.  We are expecting that the
rules for implementation would be enacted by the Chinese government in the
coming months.  After the rules are enacted, we can better assess what
the impact of the new unified tax law would be over this period.  The
discontinuation of any special or preferential tax treatment or other incentives
could adversely affect our business and our net income.




26





WE MAY BE
EXPOSED TO LIABILITIES UNDER THE FOREIGN CORRUPT PRACTICES ACT, AND ANY
DETERMINATION THAT WE VIOLATED THE FOREIGN CORRUPT PRACTICES ACT COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.





We are
subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that
prohibit improper payments or offers of payments to foreign governments and
their officials and political parties by U.S. persons and issuers as defined by
the statute, for the purpose of obtaining or retaining business.  We
have operations, agreements with third parties and we make sales in
China.  Our activities in China create the risk of unauthorized
payments or offers of payments by the employees, consultants, sales agents or
distributors of our Company, even though they may not always be subject to our
control.  It is our policy to implement safeguards to discourage these
practices by our employees.  However, our existing safeguards and any
future improvements may prove to be less than effective, and the employees,
consultants, sales agents or distributors of our Company may engage in conduct
for which we might be held responsible.  Violations of the FCPA may
result in severe criminal or civil sanctions, and we may be subject to other
liabilities, which could negatively affect our business, operating results and
financial condition. In addition, the U.S. government may seek to hold our
Company liable for successor liability FCPA violations committed by companies in
which we invest or that we acquire.





RISKS
RELATED TO CORPORATE AND STOCK MATTERS





OUR STOCK
IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY
STOCK REGULATIONS WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR
STOCK.





Our stock
is a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny
stock" to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Our securities are covered by the penny stock rules, which
impose additional sales practice requirements on broker-dealers who sell to
persons other than established customers and "accredited investors". The term
"accredited investor" refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.





In
addition, we intend to apply for our common stock to be quoted on NASDAQ’s the
Over-the-Counter Bulletin Board (OTCBB).  There can be no assurance
that we will be able to successfully apply for listing on the OTCBB or
eventually on the American Stock Exchange, the NASDAQ Global Select Market, or
the NASDAQ Capital Market due to the trading price of our common stock, our
working capital and revenue history.  Failure to list our shares on
the OTCBB, the American Stock Exchange, or one of the NASDAQ Markets will impair
the liquidity of our common stock.





NASD
SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND
SELL OUR STOCK.





Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
promulgated thereunder by the SEC require broker-dealers dealing in penny stocks
to provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor's
account.




27





Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii)reasonably determine, based
on that information, that transactions in penny stocks are suitable for the
investor and that the investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for holders of our common stock to resell their shares to third
parties or to otherwise dispose of them in the market or otherwise.





SHARES
ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT OF OUR RESTRICTED STOCK IN THE
PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.





From time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in the
open market pursuant to Rule 144, promulgated under the Securities Act ("Rule
144"), subject to certain limitations. In general, pursuant to Rule 144, a
stockholder (or stockholders whose shares are aggregated) who has satisfied a
one-year holding period may, under certain circumstances, sell within any
three-month period a number of securities which does not exceed the greater of
1% of the then outstanding shares of common stock or the average weekly trading
-volume of the class during the four calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of securities, without any
limitations, by a non-affiliate of our company that has satisfied a two-year
holding period. Any substantial sale of common stock pursuant to Rule 144 or
pursuant to any resale prospectus may have an adverse effect on the market price
of our securities.





WE HAVE A
HIGH CONCENTRATION OF STOCK OWNERSHIP AND CONTROL, AND A SMALL NUMBER OF
SHAREHOLDERS HAVE THE ABILITY TO EXERT SIGNIFICANT CONTROL IN MATTERS REQUIRING
SHAREHOLDER VOTES AND MAY HAVE INTERESTS THAT CONFLICT WITH YOURS.





Our
common stock ownership is highly concentrated. See “Principal Shareholders.” As
a result, a relatively small number of shareholders, acting together, have the
ability to control all matters requiring shareholder approval, including the
election of directors and approval of mergers and other significant corporate
transactions. This concentration of ownership may have the effect of delaying,
preventing or deterring a change in control of our company. It could also
deprive our shareholders of an opportunity to receive a premium for their shares
as part of a sale of our company and it may affect the market price of our
common stock. In deciding how to vote on such matters, those shareholders’
interests may conflict with yours.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.





None.





Item
3.    Defaults Upon Senior Securities.




None.




Item
4.   Submission of Matters to a Vote of Security Holders.




None.




Item
5.   Other Information.




None.




Item
6.   Exhibits.




Exhibit No.
                
                Title of Document31.1
                
                Certificationof Principal Executive Officer pursuant to Rule 13a-14 and Rule
      15d-14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended31.2
                
                Certificationof Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
      14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended32.1
                
                Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive
      Officer)32.2
                
                Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial
      Officer)




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SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, there unto duly
authorized.




Universal
      Solar Technology, Inc.Date: 
      January 8, 2009
                    By:
                    /s/
      Wensheng ChenWensheng
      ChenChief
      Executive OfficerJanuary
      8, 2009
                    By:
                    /s/
      Ling ChenLing
      Chen
                      Chief
      Financial Officer
                      (Principal
      Financial and Accounting
Officer)


29